Nuclear Power’s Global Expansion: Weighing Its Costs and Risks explores the potential answers to questions such as, will the global spread of nuclear power programs, which could bring many more countries much closer to acquiring nuclear weapons capabilities, be an inevitable consequence of energy market economics? Or is such an expansion impossible without government subsidies and new policies to support them? This volume showcases the analyses of some of the world’s leading energy experts to shed light on this key 21st century security issue, published online by the U.S. Army War College Strategic Studies Institute.

Published by:

The Strategic Studies Institute Publications Office, United States Army War College

Chapter 1

Nuclear Power, Energy Markets, and ProliferationHenry Sokolski

OVERVIEW

When security and arms control analysts list what has helped keep nuclear weapons technologies from spreading, energy economics is rarely, if ever, men­tioned. Yet, large civilian nuclear energy programs can—and have—brought states quite a way towards developing nuclear weapons;[1] and it has been market economics, more than any other force, that has kept most states from starting or completing these pro­grams. Since the early 1950s, every major government in the Western Hemisphere, Asia, the Middle East, and Europe has been drawn to atomic power's allure, only to have market realities prevent most of their nuclear investment plans from being fully realized.

With any luck, this past may be our future. Cer­tainly, if nuclear power programs continue to be as difficult and expensive to complete as they have been compared to their nonnuclear alternatives, only addi­tional government support and public spending will be able to save them. In this case, one needs to ask why governments would bother, especially in light of the security risks that would inevitably arise with nuclear power's further proliferation. On the other hand, if nuclear power evolves into the quickest and least expensive way to produce electricity while abat­ing carbon emissions, little short of a nuclear explo­sion traceable to a peaceful" nuclear facility is likely to stem this technology's further spread—no matter what its security risks might be.

Adam Smith's Invisible Hand, then, could well de­termine just how far civilian nuclear energy expands and how much attention its attendant security risks will receive. Certainly, if nuclear power's economics remain negative, diplomats and policymakers could leverage this point, work to limit legitimate nuclear commerce to what is economically competitive, and so gain a powerful tool to help limit nuclear prolif­eration. If nuclear power finally breaks from its past and becomes the cheapest of clean technologies in market competitions against its alternatives, though, it is unlikely that diplomats and policymakers will be anywhere near as able or willing to prevent insecure or hostile states from developing nuclear energy pro­grams, even if these help them make atomic weapons.

What follows is a deeper explication of these points. The first section, Costs," examines what the economics for nuclear power have been and are pro­jected to be. The second, Justifications," examines the environmental, energy security, and political reasons why nuclear power's relatively poor economic perfor­mance has been downplayed. The third section, Con­cerns," explores the reasons why continuing with such downsizing is risky, and the final section Economics: A Way Out," examines how market economic compe­titions could be used to help steer us towards cheaper, safer forms of energy.

COSTS

Nuclear Power's Past.

In the early 1950s, U.S. Atomic Energy Commis­sion Chairman Lewis Strauss trumpeted the prospect of nuclear electricity too cheap to meter."[2] An inter­national competition, orchestrated under President Dwight D. Eisenhower's Atoms for Peace Program, ensued between the United States, Russia, India, Ja­pan, and much of Western Europe to develop com­mercial reactors. Several reactor and nuclear fuel plants were designed and built, endless amounts of technology declassified and shared world-wide with thousands of technicians, and numerous research re­actors exported in the 1950s. Yet ultimately relatively cheap and abundant oil and coal assured that only a handful of large power plants were actually built.[3]

The next drive for nuclear power came in the late 1960s just before the energy crisis" of the early 1970s. President Richard Nixon, in announcing his Project Independence," insisted that expanding commercial nuclear energy was crucial to reducing U.S. and allied dependence on Middle Eastern oil.[4] France, Japan, and Germany, meanwhile, expanded their nuclear power construction programs in a similar push to establish energy independence. The United States, Russia, Ger­many, and France also promoted nuclear power ex­ports at the same time. Four thousand nuclear power plants were to be brought on line world-wide by the year 2000.

But, market forces, coupled with adverse nuclear power plant operating experience, pushed back. As nuclear power plant operations went awry (e.g., fuel cladding failures, cracking pipes, fires, and ultimately the Three Mile Island incident), spiraling nuclear con­struction costs and delays, as well as the disastrous accident at Chernobyl, killed the dream. More than half the U.S. nuclear plant orders were cancelled, and almost 90 percent of the projected plants globally—in­cluding a surprisingly large number of proposed proj­ects in the Middle East—were never built.[5]

Nuclear Power's Projected Future.

Today, a third wave of nuclear power promotion is underway, buoyed by international interest in reduc­ing greenhouse gas emissions and national concerns in enhancing energy security at least as measured in terms of reliance on oil. The U.S. nuclear industry has been lobbying Congress to finance the construction of more than $100 billion in reactors with federal loan guarantees.[6] President Barack Obama has responded by proposing $36 billion dollars in new federal loan guarantees for nuclear power.[7] Other governments in Asia, the Middle East, and Latin America have renewed their plans for reactor construction as well. Even Europe is reconsidering its post-Chernobyl am­bivalence toward nuclear power: Finland, France, Italy, and Eastern Europe are again either building or planning to build power reactor projects of their own. Germany and Sweden, meanwhile, are reconsidering their planned shutdown of existing reactors.

In all this, the hands of government are evident. Certainly, if nuclear power were ever truly too cheap to meter and could assure energy security, or elimi­nate greenhouse gas emissions economically, private investors would be clamoring to bid on nuclear power projects without governmental financial incentives. So far, though, private investors have avoided put­ting any of their own capital at risk. Why? They fear nuclear energy's future will echo its past. In the 1970s and 1980s, new nuclear power projects ran so far be­hind schedule and over budget, most of the ordered plants had to be cancelled. Even those that reached completion were financial losers for their original util­ity and outside investors, and the banking sector be­came wary.

In this regard, little has changed. In Finland, a turnkey reactor project has been executed by French manufacturer AREVA, in part as a way to demon­strate just how inexpensively and quickly new nuclear plants could be built. The project is now more than 3 years behind schedule and at least 80 percent over budget. Finland says AREVA is to blame for the cost overruns and construction delays. AREVA blames Finland and has threatened to suspend construction entirely in hopes of securing a more favorable rate of return.[8]

Meanwhile, in Canada, the government of Ontario chose to avoid this fate. It put its nuclear plans to build two large power plants on hold after receiving a $26 billion bid that was nearly four times higher than the $7 billion the government originally set aside for the project only 2 years before.[9]

In the United States, the estimated cost of two reac­tors that Toshiba was planning to build for NRG En­ergy and the city of San Antonio recently jumped from $14 billion to $17 billion. Consequently, the city board delayed its approval of $400 million in financing for the project, sued NRG, and reduced its share of the project from roughly 50 percent to less than 8 percent.[10] These estimates of the full costs to bring a new nuclear plant on line reflect a typical pattern of cost escalation, as San Antonio's experience has been replicated in many other places. Estimated construction costs (exclusive of financing) per one installed kilowatt of production capacity have jumped from a little over 1,000 dollars in 2002 to well over $7,000 in 2009. (Figure 1-1 depicts the range of rising overnight" cost estimates over the last decade, with no interest on costs paid during con­struction, thus overnight.")

Figure 1-1. Overnight Capital Costs Projections for New Power Reactors

To address these concerns, the U.S. nuclear indus­try has succeeded in getting Congress to support a growing number of subsidies, including nuclear ener­gy-production tax credits and very large federal loan guarantees. Industry estimates indicate that proposed loan guarantees alone would save an American util­ity at least $13 billion over 30 years in the financing of a single modern nuclear reactor.[12] Granting these and additional government incentives, though, may not be sufficient. First, in 2003, the U.S. Congressional Budget Office (CBO) estimated that the nuclear in­dustry would probably be forced to default on nearly 50 percent of these loans.[13] Second, in 2009, Moody's warned that barring a dramatic positive change in utility-industry balance sheets, the ratings firm would downgrade any power provider that invested in new nuclear reactor construction since these projects were bet the farm" gambles. Moody's threat to reduce credit ratings included utilities that might secure fed­eral loan guarantees, which Moody's described as too conditional" to be relied on.[14]

Meanwhile, the president of America's largest fleet of nuclear power plants, who now serves as the World Nuclear Association's Vice Chairman, publicly cautioned that investing in new nuclear generating ca­pacity would not make sense until natural gas prices rise and stay above $8 per 1,000 cubic feet (mcf) and until carbon prices plus taxes rise and stay above $25 a ton.[15] Yet industry officials believe that neither condi­tion, much less both, is likely to be met any time soon. Past price history suggests why. (See Figure 1-2.)

Figure 1-2: Natural Gas and Carbon Prices—Hardly Steady or High Enough to Underwrite

Recent developments suggest their skepticism is warranted. After the latest international conference to control carbon emissions held in December 2009 in Copenhagen, Denmark, carbon prices in the European carbon market hit a near all-time low. U.S. natural gas prices, meanwhile, driven by reduced demand and massive increases in supplies and newly discovered reserves, have also dropped precipitously. There is good reason to believe that they are unlikely to rise significantly any time soon.[17] Conclusion: Without sig­nificant additional government financial incentives, private investments in new nuclear electricity are un­likely to be made.[18]

JUSTIFICATIONS

Energy Security.

Many decisionmakers in the energy sector under­stand this. This, in turn, has given rise to a public fo­cus on another, less measurable but possible nuclear power benefit: Energy security. The case here, though, is also yet to be proven. In most large industrial coun­tries, oil is only rarely used to produce electricity, but rather is being consumed at increasing rates to fuel a growing fleet of cars and trucks. This makes the link between oil imports and nuclear power quite tenuous at present. The nuclear-vice-oil argument put forth by some experts is future oriented: Some day nuclear power might supply the electricity and hydrogen to power the world's transport fleets. However, for both electric and hydrogen vehicles, much is still unknown about the costs, rate of market penetration, and even whether nuclear will prove to be the most economical way to produce the needed energy resources.

Unfortunately, few of these central issues are given serious attention in the popular news media. Instead, France, which made a massive investment in nuclear power in the 1970s and now produces about 80 per­cent of its electricity from nuclear energy, is held up as an energy-independence model for the United States and the world to emulate.[19] This particular nuclear example, however, has been quite costly and has not really weaned France away from its addiction to oil. France covered much of the startup and operating cost of its civilian nuclear program by initially integrat­ing the civilian nuclear power sector with its military nuclear-weapons-production program. It also used massive amounts of cheap French government financ­ing to pay for the program's capital construction. As a result, it is unclear how much in real francs the French program actually cost overall, or how much plant costs escalated over the life of the French program, although they clearly did.[20] What is undisputed, however, is that from the 1970s to the present, France's per-capita rate of oil consumption never declined; and that the country has needed to import increasing amounts of expensive peak-load electricity from its immediate neighbors due to the supply inflexibility of base-load nuclear electricity.[21] Despite these facts, though, the claim of French nuclear energy independence persists.

Abating Carbon Emissions.

Another argument nuclear power supporters fre­quently make is that the need to abate carbon emis­sions will make nuclear energy economically com­petitive through rising carbon prices. Once carbon is no longer cheap, nuclear proponents argue that zero-carbon emission nuclear power plants will be the clear, clean-energy victor over coal with carbon capture systems, natural gas, and renewables. Yet, by industry's own projections, new nuclear power plants have already priced themselves out of the running in any near or mid-term carbon abatement competition. Factoring industry construction cost projections, op­eration and decommissioning costs, and key public nuclear-specific U.S. subsidies, the total cost of abat­ing one ton of carbon dioxide (CO2) by substituting a new nuclear power plant for a modern coal-fired gen­erator has been pegged by a leading environmental energy economist at least $120. This figure assumes fairly low capital construction costs (roughly one-half of the industry's latest high-end cost projections). If one uses industry's high-end projections, the cost for each abated ton of CO2 approaches $200. This is ex­pensive. Certainly, there currently are much cheaper and quicker ways to reduce carbon emissions (see Figure 1-3).

Yet another recent study completed by one of America's largest nuclear reactor operators, Exelon, confirms these points. Speaking before a May 12, 2010, Washington, DC, Resources for the Future policy lead­ership forum, John Rowe, Chairman and CEO of Ex­elon, presented analysis that clarified how expensive a new nuclear plant might be. As his central and final power point slide make clear (see Figure 1-4), carbon prices would have to rise to roughly $100 a ton of CO2 before he would recommend that Exelon invest in building new power reactors. Even with federal loan guarantees, Exelon's analysis determined that carbon would have to be priced at roughly $75 per ton of CO2 (which is nearly twice Exelon's projected long-run CO2 price" of $40 a ton) before it would make econom­ic sense to build new power reactors. Before Excelon would invest in new nuclear construction, it would update its existing 19 nuclear plants, shut down its coal-fired generating stations, bring more natural gas-fired plants on line, and invest in energy efficiency programs and renewables.

Just how rapidly a nuclear approach can begin abat­ing carbon emissions (compared to its alternatives) is also a significant issue. Certainly, if one is interested in abating carbon in the quickest, least expensive fash­ion, building expensive nuclear plants that take up to a decade to bring on line will have difficulty abating carbon competitively no matter how much carbon is taxed. That is why in North and South America and the Middle East, building natural gas-burning genera­tors is currently an attractive, near-term option. Ad­vanced gas-fired power plants can halve carbon emis­sions as compared to coal-fired plants, can serve as base or peak power generators, and be brought on line in 18 to 30 months rather than the 5 to 10 years needed to build large reactors. Advanced gas-fired generator construction costs, meanwhile, are a fraction of those projected for nuclear power.[24]

Where natural gas is plentiful, as it clearly already is in the Middle East and the United States, these economic facts should matter.[25] The benefits of gas become even more evident once one factors in the nuclear-specific burdens for nations with no current capacity to create proper regulatory agencies and pre­pare the grid for a large base-load generator.[26]

A Future Unlike Our Past?

The counter to the foregoing argument, of course, is that fossil fuel resources are finite and will run out over time. This is irrefutable in principle, but, in prac­tice, when and how one runs out matters. Backers of renewables,[27] for example, insist that renewables' costs are coming down significantly. Proponents of wind power argue that its costs have declined by more than 80 percent over the last 20 years.[28] The cost of solar photovoltaic-generated electricity has also been fall­ing (see, for example, the costs of delivered solar elec­tricity in Figure 1-5).

Figure 1-5. Cost of Installed Photovoltaics.

Many energy experts contend that significant changes would have to be made in how electricity is currently distributed and stored before intermittent generators like renewables could compete in address­ing base load demand. Yet, as renewables' costs con­tinue to decline, the incentives needed to prompt these changes are likely to increase.[29] Meanwhile, nuclear power's costs are high and rising. Finally, with new sources of oil and gas now projected to come on line, it is unclear when or how much fossil fuel prices might increase. All of this generates significant uncertainty and risk for nuclear power investors.

In the mid-term ( i.e., the next 2 decades) when nuclear advocates see this power source reemerging, a number of energy developments could easily destroy whatever value might be credited to investments made in commercial nuclear energy today. As noted, new electrical grid concepts could be employed in­crementally to make the transmission of intermittent wind and solar much more practical, as could the de­velopment of practical electrical storage and of viable distributed electrical systems.[30] Economical sequestra­tion of carbon from coal-fired plants also may emerge along with increased efficiency in the use of electricity and smart metering that could change and reduce de­mand pattern.

Although none of these developments are guaran­teed, any one of them could have a dramatic impact on the long-term economic viability of presently invest­ing in nuclear systems that would operate for 60 years or more after coming on line in 2020 and beyond. In fact, the uncertainties surrounding the costs for elec­tricity generation, distribution, transmission, storage, and consumption are all very much in play for the first time in over a century. This very fluid and uncertain situation not only argues for great caution in the al­location of public funds on any energy commercializa­tion project, but also underscores the importance of ensuring neutral markets in which multiple solutions are forced to compete against each other.

Government Nuclear Power.

Governments, on the other hand, view matters dif­ferently. The energy market uncertainties noted above have only encouraged them to invest more in clean energy commercialization options. In practice, this has meant they have invested most heavily in the most capital intensive options. Thus, the current carbon and energy security challenges have been addressed by Ja­pan, South Korea, China, India, Russia, France, and the United States by initiating investments in carbon sequestration and renewables. More important, each of these governments has continued and significantly increased massive government subsidies—e.g., loan guarantees, commercial export loans, energy produc­tion credits, accident liability caps and indemnifica­tion, and construction delay insurance programs—for the construction of new, large nuclear power plants.[31]

Several factors fortify these governments' instinct to support nuclear commercialization. First, in sev­eral important cases—e.g., in France, Russia, India, South Korea, and Japan—the nuclear industry's pay­rolls have long been large and are essentially pub­lic: Commercial nuclear activities in these states are run through entities that are primarily government-owned. Exposing these industries to the full force of market realities could result in significant layoffs and other dislocations large enough to produce negative political results. Continuing to subsidize them, on the other hand, is politically astute.

Second and less immediate, commercial nuclear power's historical links to national security continue to make government support seem natural. Within the oldest and most significant nuclear states—the Unit­ed States, the United Kingdom (UK), France, Russia, and India—government-run, dual-use reactors were long connected to electrical grids to produce nuclear weapon fuels and electricity. In the United States, this includes the Hanford dual-purpose reactor in Wash­ington State (no longer operating), and the Tennessee Valley Authority's tritium-producing light water re­actors (whose operations are about to be expanded). It includes Russia's RMBK reactors, which made pluto­nium for Russia's arsenal until the l990s; France's gas-cooled natural uranium and breeder reactors, which did the same plutonium chore for France through the l980s; India's heavy water reactors and planned breeder reactors, which currently provide tritium and plutonium for India's nuclear weapons program; and Britain's Magnox plants, which provided the bulk of the plutonium for the UK nuclear arsenal. As for the most popular of nuclear power systems, pressurized light-water reactors (versions of which Germany, France, Russia, Japan, South Korea all now export and operate), these were originally developed in the Unit­ed States for nuclear submarine and naval propulsion.

This rich history of defense-related government involvement in nuclear energy has made the new government financial incentives to promote the con­struction of additional nuclear power and fuel making plants seem normal. Yet, pushing such government support of energy commercialization projects, both nuclear and non-nuclear, actually flies in the face of what market forces would otherwise dictate. More important, it hides the full costs and risks associated with each energy option. This, in turn, is undesirable for several reasons.

CONCERNS

Commercial Energy Innovation.

Conventional wisdom holds that government subsidies to commercialize technology optimize and catalyze commercial energy modernization. In reality, subsidy policies are politically challenging to imple­ment. Not surprisingly, those that do make it into law most often support the more established and power­ful players in the market independent of technical merit. As such, government promulgation of energy commercialization subsidies makes it more difficult for winning ideas to emerge or prevail against large-scale losers, and this difficulty can increase over time. The reason why is simple: Once government officials make a significant financial commitment to a commercial project, it becomes politically difficult for them to ad­mit it might be losing money or that it was a mistake to have supported it, even when such conclusions are economically clear. A lock-in" effect begins to take hold: Not only will governments not terminate fund­ing to clear losers; they may actually shore up such projects with additional funding or legal mandates to force the public to buy the project's commercial pro­duction even when cheaper alternatives clearly exist.

Thus, it was evident to most that the U.S. Gov­ernment's commercial synfuels and breeder reactor projects were economically untenable years before Congress finally decided to kill the projects. The de­lay in terminating these projects cost taxpayers bil­lions of dollars. These projects, though, at least died. With government mandated energy commercializa­tion programs such as corn ethanol, however, the U.S. Government has essentially mandated that the prod­uct be produced and bought by the public in increas­ing amounts in the face of little or no market demand.[32] Besides costing U.S. consumers billions of dollars an­nually, this program is becoming institutionalized in such a manner as to make it more difficult to phase-out or terminate in the future. In France, Japan, China, Russia, Korea, and India, where the power of the gov­ernment in commercial matters is stronger, this ten­dency is even more pronounced.

Nuclear Safety and Off-site Damage.

With nuclear-specific energy commercialization subsidies, such as low-priced nuclear accident li­ability insurance, private sector incentives that would otherwise improve operational and design safety also take a hit. Under U.S. law, U.S. commercial nuclear reactor operators (about 100 in number) must secure private insurance sufficient to cover roughly the first $300 million of damages any nuclear accident might inflict on third parties off site. After any accident, the law provides that each nuclear utility should also pay up to approximately $96 million per reactor in annual installments of $15 million each (plus a bit more ear­marked for legal fees) should the first-tier policy be exceeded. This requirement, however, can be delayed or waived entirely by the Secretary of Energy if, in his judgment, it would threaten the financial stability of the firm paying it. These retrospective premiums are paid as a blanket requirement: They are virtually identical for both the safest and worst run utilities.[33]

By most accounts, such pooling and the capping of liability lessens the cost of nuclear insurance sig­nificantly to the nuclear industry as a whole.[34] A key argument for such pooling and liability caps is that it is unreasonable to ask the nuclear industry to assume the full costs of insuring against nuclear accidents and nuclear terrorism because these risks are simply too large.[35] This certainly has been the logic behind the passage of the U.S. Terrorism Risk Insurance Act of 2002 and its repeated extension.[36] Yet, these acts are claimed by their backers to be only temporary," i.e., designed to allow private insurers the time to adjust to a new risk market.

As both the CBO and the U.S. Treasury Department have argued, capping private firms' need to insure against catastrophic losses make sense only if the risks of such losses are very low and unlikely to persist. In such cases, federal subsidies for insurance could be justified as a means of avoiding expensive and un­necessary effort to reduce losses." If, as is more likely, in the case of nuclear safety and vulnerability to ter­rorist attacks, the long-term risks are either long-lived or, in view of the September 11, 2001 (9/11) attacks and the aging of the existing reactor fleet, likely to in­crease,[37] such federal assistance" could be costly to the economy because it could further delay owners of assets from making adjustments to mitigate their risk and reduce potential loses."[38] Here, it is worth noting that neither General Electric nor Westinghouse has yet succeeded in producing a reactor design that can meet the Nuclear Regulatory Commission's latest require­ment that the plant be able to sustain a large, direct airplane hit. Westinghouse's latest submission to meet this requirement was actually found to be wanting and was rejected because it created unintended vul­nerabilities to natural disasters such as earthquakes.[39]

Unfortunately, regarding reactor safety and the continued need for insurance liability caps, the U.S. nuclear industry has been increasingly schizophrenic. Originally, in 1957 when the nuclear industry first se­cured legislation capping its nuclear accident liability for damages suffered by third parties, it claimed that it only needed the protection until utilities had a chance to demonstrate nuclear power's safety record, i.e., un­til 1967. A half century later, though, industry officials pleaded with Congress that without another 20-year extension, commercial nuclear power would die. They also insisted that they were still unwilling to export U.S. nuclear goods to foreign states that have not yet explicitly absolved nuclear vendors from liability for damages off-site third parties might suffer in the case of an accident.[40]

The world's nuclear future, however, is supposed to be better. Industry backers of the latest reactor de­signs claim that their new plant machinery will be dramatically safer than that currently operating and argue that government accident insurance caps could be phased out.[41] Certainly, industry arguments against even higher coverage requirements under their Price-Anderson coverage seem implausible. The U.S. nucle­ar industry is already more than willing to pay for in­surance to cover damages to their own nuclear assets. In fact, for a single power plant location, most nuclear utilities are buying over 10 times the amount of insur­ance to protect against on-site accident damage and forced outages than Price-Anderson requires them to carry against off-site property and health damages for the entire United States. At a minimum, this suggests that the insurers and utilities are able to provide sub­stantially more than the $300 million in primary cov­erage for off-site accidents that they currently must purchase by law. Finally, several U.S. nuclear reactor vendors rely heavily upon taxpayer appropriations to help pay for their advanced safer" commercial reac­tor designs. These accident-resistant" reactors are precisely the ones that industry says will come on line by 2025, the date the current nuclear insurance liability limits under Price-Anderson legislation will run out. Though U.S. nuclear liability coverage seems quite inadequate, it is regrettably even worse abroad. Within Europe—the second largest nuclear-powered region in the world—nuclear accident insurance re­quirements are not just inadequate, but egregiously inconsistent. Thus, nuclear accident insurance re­quirements that are much lower in Eastern Europe than in the European Union (EU) currently are en­couraging reactor construction in states with the least stringent liability requirements and some of the weak­est nuclear safety regulatory standards. Because of this worry, some experts are now arguing that the EU should adopt a nuclear insurance pooling scheme at least as tough as that in the United States. To avoid the potential problem of allowing the pool to charge too little, they argue that the pool should require higher payments than in the United States. Yet, they note that securing any uniform insurance requirement would be better than continuing to have none. [42]

Proliferation.

With commercial nuclear energy projects, especial­ly those exported overseas, there is a major additional worry—nuclear energy's link to nuclear weapons pro­liferation. Here, the security risks are real, particularly in the Middle East. Israel, the United States, Iran, and Iraq have launched aerial bombing or missile strikes against reactors at Osirak in Iraq and Bushehr in Iran, even though Iraq and Iran were members of the Nu­clear Nonproliferation Treaty (NPT) and the attacked reactors were under International Atomic Energy Agency (IAEA) safeguards. If one includes the 2007 Israeli strike against Syria's reactor and Iraq's failed missile attack against Dimona during the first Gulf War, there have been no fewer than 13 acts of war di­rected against IAEA member state reactors.

Such facts should put a security premium on ef­forts to subsidize the construction of such projects both here and abroad. Certainly, the more the U.S. and other advanced economies go out of their way to use gov­ernment financial incentives to promote the expansion of nuclear power programs domestically or overseas, the more difficult it is likely to be to dissuade devel­oping nations from making similar investments. This dynamic will exist even if the nuclear projects in ques­tion are clearly uncompetitive with nonnuclear alter­natives. Moreover, we should be trying to discourage subsidies that substantially assist these states to move closer to developing nuclear weapons options.

Consider Iran. The United States, perhaps more than any other country, was responsible for encourag­ing the Shah to develop nuclear power in the 1970s. Because the United States saw the Shah as a close ally, little thought was given to the potential security im­plications of our sharing advanced nuclear technology with Iran. When Iran's revolutionary government be­gan to rebuild its Bushehr power station with Russian help, though, the United States rightly became con­cerned about the proliferation risks of this peaceful" program.

Presidents Bill Clinton and George W. Bush warned that Bushehr could be used as a cover for illicit nuclear weapons related activities. It also was noted that once the reactor comes on line, it produces scores of bombs' worth of weapons-usable plutonium annually, which can be diverted to make bombs.[43] The fresh fuel, meanwhile, could be used to accelerate a uranium en­richment program.[44] It was because of these facts that during the first term of the Bush administration, the State Department went to great lengths to challenge the economic viability of the Iranian nuclear program as compared to burning plentiful natural gas. Presi­dent Bush also insisted publicly that no new nuclear power state needed to make nuclear fuel to enjoy the benefits of nuclear power.[45]

In its second term, however, the Bush administra­tion decided to add significant new nuclear subsidies to promote nuclear power plant construction in the United States under the Energy Policy Act of 2005, and to encourage an expansion of nuclear fuel-making with new technologies where it was already commer­cially underway. It was roughly during this period that the United States also decided to grandfather" Bushehr and offered Iran power reactor assistance if it would only suspend its nuclear fuel-making program.

With this, the United States essentially forfeited its economic critique of Iran's power program. In July of 2007, U.S. President Bush and Russian President Vlad­imir Putin publicly recommended that international and regional development banks make cheap loans for civilian nuclear power programs.[46] The White House also began encouraging the development of nuclear power throughout the Middle East as a way to put the lie to Iran's claim that the United States and its partners were trying to deny all Muslims the peace­ful atom."[47] The economic merits of encouraging such nuclear power proliferation, as has already been not­ed, are dubious. Yet, Russia, France, South Korea, the United States, China, and India are nonetheless open­ly competing to secure contracts in the Middle East and beyond using a variety of government supported subsidies to drive down nuclear prices.

ECONOMICS: A WAY OUT

Linking Economics with Security and the NPT.

For observers and officials worried about the risks of nuclear power proliferation, merely arguing for governments to be more consistent and neutral eco­nomically in their selection of different power generalization systems might seem cynically inattentive to the substantial security dangers posed by the expansion of nuclear power. Certainly, the United States and other states have oversold how well international nuclear inspections can prevent military diversions from civil­ian nuclear programs. Even today, the IAEA cannot yet reliably track spent or fresh fuel for roughly two-thirds of the sites it monitors. Worse, diversions of this material, which can be used as feed for nuclear weapon fuel-making plants, could be made without the IAEA necessarily detecting them.[48] As for large fuel-making plants, the IAEA acknowledges that it cannot reliably spot hidden facilities and annually loses track of many bombs' worth of material at declared plants. With new money and authority, the IAEA could perhaps track fresh and spent fuel better; however, the laws of physics are unfriendly to the agency's ever being able to reliably detect diversions from nuclear fuel-making plants.[49]

If international nuclear inspections cannot protect us against possible nuclear proliferation, though, what can? It would help if there were more candor about the limits of what nuclear inspections can reliably detect or prevent. But just as critical is more frankness about how little economic sense most new nuclear power programs make. It is governments and their publics, after all, which determine whether or not more large civilian energy plants will be built. If government of­ficials and the public believe backing nuclear power is a good investment, public monies will be spent to build more plants in more countries no matter how dangerous or unsafeguardable they might be.

In this regard, it is useful to note that the NPT is dedicated to sharing the benefits" of peaceful nuclear energy. These benefits presumably must be measurably beneficial." At the very least, what nuclear activ­ities and materials the NPT protects as being peaceful and beneficial ought not to be clearly dangerous and unprofitable. That, after all, is why under Articles I and V, the NPT bans the transfer of civilian nuclear explo­sives to nonweapons states and their development by nonweapons states. It is also is why the NPT's original 1968 offer of providing nuclear explosive services has never been acted upon and is a dead letter now: Not only was it determined that it was too costly to use nuclear explosives for civil engineering projects (the cost of clean-up was off the charts), but some states (e.g., Russia and India) falsely claimed they were de­veloping peaceful nuclear explosives when, in fact, they were conducting nuclear weapons tests.[50]

What, then, should be protected under the NPT as being peaceful" today? Are large nuclear programs economically competitive, i.e., beneficial" in places like the Middle East when compared to making power with readily available natural gas? What of making en­riched uranium fuel for one or a small number of reac­tors? Would it not be far cheaper simply to buy fresh fuel from other producers? Does reprocessing make economic sense anywhere? Can nuclear fuel making be reliably safeguarded to detect military diversions in a timely fashion? Are not such activities dangerous­ly close to bomb making? Should these activities be allowed to be expanded in nonweapons states and to new locales or, like peaceful" nuclear explosives, are the benefits of these programs so spurious and the ac­tivities in question so close to bomb making or testing as to put them outside the bounds of NPT protection? What of large reactors, which are fueled with large amounts of fresh enriched uranium or that produce large amounts of plutonium-laden spent fuel? Should these be viewed as being safeguardable in hostile or questionable states, such as Iran or North Korea, that have a record of breaking IAEA inspection rules?

Again, getting all of the world's nations to agree on the answers to these questions will be difficult if nuclear power is truly the least expensive way to pro­duce low or no carbon emission power. In this case, it may be impossible to prevent nuclear technology use­ful to making bombs from spreading world-wide. But if civilian nuclear energy projects are not economical­ly competitive against their nonnuclear alternatives, the case against states spending extra to promote the commercial expansion of potentially dangerous com­mercial nuclear projects would be far stronger.

Uncertainties.

The only thing certain about nuclear power's fu­ture ability to compete against other commercial ener­gy alternatives is its uncertainty. This is so for several reasons. First, 20 years out, it is uncertain how much power will be distributed off a centralized grid and how much will come from more distributed systems (e.g., local grids, cogeneration plants, storage batter­ies, and the like). This is important since two-thirds of the cost of electricity at the house or business outlet is unrelated to the cost of generating the electricity. Instead, it pertains to the cost of transporting the elec­tricity over the grid and balancing and conditioning the power inputs and outputs on that grid to assure that it does not fail.

Second, it is unclear how many base load genera­tors will be needed 10 to 20 years out since so much of the current demand for electrical generating capacity in advanced economies is driven by the need to have instantly available follow-on load capacity that fre­quently remains idle.[51] If our experts could figure out how to store electricity economically (and a number of schemes are now being tried out), the current pre­mium placed on having significant reserves of addi­tional base load follow-on capacity generators—typi­cally supplied by large coal-fired plants, large hydro, or nuclear reactors—could be reduced significantly.

Third, there is much uncertainty with respect to carbon charges on which nuclear economics heavily depend. Will carbon be taxed and, if so, at what rate? What sectors will be grandfathered; which sectors of the economy will benefit the most from the con­straints? The EU has a cap and trade system that the U.S. Congress is considering emulating. Under this system, government authorities allocate carbon allow­ances to different industrial concerns and sectors. Ini­tial grants of credits follow patterns of most subsidies, with some sectors—often the most politically power­ful—benefiting far more than others. Winners" un­der the new system shift from economic and technical performance to political.

All of this seems an odd way to promote cost-com­petitive clean energy. Instead, it would make more sense simply to focus on cost comparisons for future plants that incorporated the full value of government subsidies and reflected a standardized carbon cost (e.g., a price on the carbon content of different fuels). To foster the proper use of such information, though, we will need to rely more, not less, on market mecha­nisms to help guide our way.

Policy Implications. Our broad conclusion is that governments should spend less time trying to determine what energy tech­nologies should be commercialized and focus instead on how market mechanisms might best be employed to make these determinations possible. This, in turn, suggests six specific steps governments might con­sider:

1. Encourage more complete, routine comparisons of civilian nuclear energy's costs with its nonnuclear alternatives. The starting point for any rational com­mercial energy investment decision is a proper evalu­ation of the costs of selecting one option over another. Here, as already detailed, governments have a weak track record. A couple of mandates stand out:

a. Account for Nuclear Power's Full Costs. One way officials could improve their performance is to take the very few economic energy assessments now required more seriously, and conduct them faithful­ly and conscientiously. The CBO, for example, must score the public costs of guaranteeing commercial en­ergy loans, including those to the U.S. nuclear indus­try. The CBO has been asked to do this by Congress several times in the last decade. Yet, the last time the CBO made the assessment for proposed loan guaran­tees in 2008, it failed to give a figure for the probable rate of default on nuclear projects. The CBO's director claims that without proprietary information, the CBO has no way to make such estimates. The CBO has not attempted such projections since 2003, when it pegged the likely default rate under proposed loan guaran­tee legislation at the time at 50 percent.[52] The Depart­ment of Energy (DoE), meanwhile, announced that essentially it also viewed the information necessary to project the default rate to be proprietary. It would be useful for the CBO to get the information it needs to update and qualify such projections. At a minimum, the CBO should tackle this question every time it es­timates what any commercial energy loan guarantees will cost. Congress, meanwhile, should demand that DoE make all of its own estimates and information relating to these projections public. Moreover, every time the CBO or DoE makes such projections their work should be reviewed in public hearings before Congress.

b. Compare Nuclear with Nonnuclear. Yet another way the U.S. Government could improve its commer­cial energy cost comparisons is by finally implement­ing Title V of the Nuclear Nonproliferation Act of 1978, which calls on the Executive Branch to conduct energy assessments in cooperation with, and on behalf of, key developing states. The focus of this cooperation was to be on nonnuclear, nonfossil-fueled alternative sources of energy. Yet, for these cost assessments to have any currency, they would have to be compared with the full life-cycle costs of nuclear power and traditional energy sources. This work also should be supported by the newly proposed United Nations (UN) Interna­tional Renewable Energy Agency (IRENA).[53] Finally, in order for any of these efforts to produce sound cost comparisons, more accurate tallies of what govern­ment energy subsidies are worth for each energy type will be required.

c. Increase the Number of Energy Subsidy Econo­mists. The number of full-time energy subsidy econo­mists is currently measured in the scores rather than in the hundreds. Government and privately funded fellowships, full-time positions, and the like may be necessary to increase these numbers.

2. Strengthen compliance with existing interna­tional energy understandings that call for internal­izing the full costs of large energy projects, and for entering them in open international bidding competi­tion. The Global Energy Charter for Sustainable De­velopment, which the United States and many other states support, already calls on states to internalize as many of external costs (e.g., those associated with government subsidies and quantifiable environmental costs such as the probable taxes on carbon) in the pric­ing of large energy projects. Meanwhile, the Energy Charter Treaty, backed by the EU, calls on states to require any large energy project or transaction to com­pete in open international bidding markets.[54] Since these agreements were drafted, international interest in abating carbon emissions in the quickest, cheapest fashion has increased significantly. The only way to assure the quickest and cheapest" is to include all the relevant government subsidies in the price of compet­ing energy sources and technologies, assign a range of projected prices to carbon, and use these figures to determine what the lowest cost energy source or technology might be in relation to a specific time line. This suggests that any follow-on to the Kyoto, Japan, understandings should require international enforce­ment of such energy comparisons by at least refer­encing the principles laid out in the Energy Charter Treaty and the Global Energy Charter for Sustainable Development. Enforcing international adherence to these principles will be challenging. A good place to start would be to work with the G-20 (Argentina, Australia, Brazil, Canada. China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Republic of Korea, Turkey, UK, the United States, and the EU) to agree to a modest action plan to follow up on Copenhagen that would include establishing common energy project cost ac­counting and international bidding rules that track these agreements. Beyond this, it would be useful to call on the G-20 to give the IAEA notice of any state decisions the G-20 believes might violate these prin­ciples by rigging assessments to favor nuclear power over cheaper alternatives. The aim here would be to encourage the IAEA to ascertain the true purpose of such economically questionable nuclear projects.[55]

3. Discourage the use of government financial in­centives to promote commercial nuclear power. This recommendation was made by the Congressional Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism.[56] It would clearly include discouraging new/additional federal loan guarantees for nuclear fuel or power plant con­struction of the type now being proposed by President Obama and the nuclear industry. Although this struc­ture should be applied against other types of energy (e.g., coal, renewables, natural gas, etc.) as well, the security risks associated with the further spread of ci­vilian nuclear energy make it especially salient in the case of nuclear. This same prohibition should also be applied against U.S. support for developmental bank loans (i.e., subsidized loans) for commercial nuclear development and against other states' (e.g., France, Japan, Germany, Russia, China, and South Korea) use of subsidized government financing to secure civil­ian nuclear exports. In some cases, these foreign ex­port loan credits are being used in the United States in conjunction with U.S. federal loan guarantees and local state tax incentives, thereby practically eliminat­ing the risks of investing in new nuclear power plant construction. This practice should be discouraged. In the case of every large civilian nuclear project, domes­tic or foreign, every effort should be made to require as much private capital at risk as possible in order to assure due diligence in these projects' execution. Even under the existing U.S. federal loan guarantee program, 20 percent of each nuclear project must be financed without federal protection. For purposes of implementing this law, this nominal figure of 20 per­cent should be covered entirely by private investment, not by resorting to rate hikes for ratepayers.[57]

4. Employ more market mechanisms to guide na­tional and international nuclear fuel cycle and waste management decisions. One of the clear advantages of civilian nuclear power plants over conventional fossil-fueled plants is that nuclear power is much cheaper to fuel. Governments, however, can negate this ad­vantage by taking steps to increase nuclear fuel cycle costs that are unrelated to the need to assure safety or international security. In this regard, states that use public money to close the fuel cycle through commer­cializing any form of spent fuel recycling will actually make nuclear power less competitive with its non­nuclear alternatives. We should emphasize:

a. Managing Nuclear Waste. Today, the lowest-cost interim solution to storing spent fuel (active for 50 to several hundred years) is dry cask storage above ground at reactor sites. Recycling spent fuel, on the other hand, is not only more expensive, but runs much greater proliferation, terrorism, and nuclear theft risks. For these reasons, President Bush in 2004, the IAEA in 2005, and the bipartisan U.S. Congres­sional Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism in 2008, all called for imposing a moratorium on commercial reprocessing.[58] This reflects economic commonsense.

Unfortunately, in many advanced states that operate nuclear power reactors, the governments own and op­erate the power plants. As a result, full employment, development of nuclear weapons options, and other political or military concerns often override straight­forward cost benefit analysis.[59] In the United States, this tendency can be avoided by having the nuclear utilities themselves assume a significant portion of the costs of nuclear waste management and reactor site decommissioning. This would require changing U.S. law, which currently stipulates that all of the costs of final spent fuel storage are to be paid for by off-budget federal user fees paid for by the ratepayers.

b. Making Nuclear Fuel. As for the front end of the nuclear fuel cycle, the preexisting procurement firm nuclear fuel contracts, rather than government appropriations or loan guarantees, should dictate when and how new nuclear fuel-making facilities should be constructed or expanded. With such con­tracts in hand, it should be possible to secure private financing for such projects. There currently is sub­stantial interest in creating international fuel banks to assure a reliable supply of fresh nuclear fuel and of reprocessing services to states that forswear making their own nuclear fuel. If any such banks are created, though, they should charge whatever the prevailing market price might be for the nuclear products and services they provide. The rationale for this is simple: Subsidizing the price risks creating a false demand for risky near weapons-usable fuels, such as mixed oxide (MOX) and other plutonium-based fuels. Currently, states can satisfy their demand for fresh fuel without having to resort to any international bank, and no state has a need to reprocess for any reason. Subsidiz­ing these fuel services has been proposed as a way to induce states to eschew making their own nuclear fuels. This proposal, however, seems unsound. First, it is unclear as to whom the customers will be. India and Canada already make their own natural uranium fuels, which require no enrichment. Several others—France, Russia, Japan, Brazil, and China—enrich their own fuel, and the remaining nuclear fuel-consuming states seem content to buy their fuels from U.S. pro­viders, Russia, URENCO, or Eurodif. Second, it is un­likely that nuclear fuel subsidies would be sufficient to block determined proliferators. After all, only a small percent of any nuclear power plant's life cycle costs are associated with its fueling requirements.[60] Again, given the dangers of propping up dangerous reprocessing activities and the dubious requirement to provide enriched fuel, the world can well afford to depend more on market mechanisms to determine when and how these services are provided.

c. Use of Weapons Grade Uranium Fuels. Finally, the use of nuclear weapons-usable highly enriched uranium is a nuclear fuel cycle option no longer nec­essary for the production of power or of medical, ag­ricultural, or industrial isotopes. There are fewer and fewer research reactors that use highly enriched ura­nium (HEU), but the few that do are more than willing to pay to continue to use this fuel rather than to pay the costs of converting to low enriched uranium alter­natives. Given the direct usability of HEU to make nu­clear weapons, however, the elimination and blending down of these fuels are imperative to avoid nuclear proliferation and terrorism risks. In the United States, the handful of remaining HEU-fueled plants receive government funding. This should end by establishing a date certain for these few remaining reactors to be converted to use LEU-based fuels.[61]

5. Increase and further privatize nuclear insurance liability coverage to encourage best construction and operations practices. Officials within the nuclear in­dustry frequently note that a nuclear industry accident anywhere would impact nuclear operators negatively everywhere. Yet, the potential financial and political fall-out following a major nuclear accident would be even more significant if there were a lack of adequate nuclear accident liability insurance. For this reason alone, efforts should be made to increase the mini­mum amounts of liability insurance coverage current­ly required of any civilian nuclear plant operators and to make those requirements less subject to over-ride or forgiveness by officials of the state. Here, amounts required by the international Convention on Supple­mentary Compensation for Nuclear Damage (CSC)[62] should be considered to be the minimum. For the EU, which is currently struggling to set a standard for its members, the coverage requirements set by CSC should be considered to be the floor from which any specific EU standard is created. It would be far preferable for the EU to adopt insurance levels that the United States currently requires under its domestic Price-Anderson legislation. The United States, meanwhile, needs to raise international nuclear insurance standards by first announcing its intention to withdraw from un­derwriting insurance against terrorist incidents as it currently does and instead require private insurance firms to assume this requirement as they did before 9/11. Second, Washington needs to make good on its original objective under the 1957 Price-Anderson leg­islation to eventually stop underwriting coverage for damages a nuclear operator might inflict on off-site third parties. Washington would do best to start this now and incrementally by announcing that beginning in 2025, federal Price-Anderson coverage caps will no longer apply to any civilian nuclear facility operating in the United States. This announcement should be made now so that the nuclear utility and vendor in­dustry can develop their own alternative private sys­tem of insurance to cover off-site damages. At a mini­mum, the requisite amounts of capital to fund such a system should be amassed well in advance of the need to bring the new insurance system into force. Under any new system, each nuclear utility, service provider, and vending firm should be free to buy as much or as little third-party liability insurance for themselves as each sees fit from private insurance firms so long as the amount was at least as much as Price-Anderson currently requires to cover any one accident (roughly $10 billion for each accident). The rates for this cov­erage would be set for each firm by private insurers based on each firm's safety performance, the age of the plant, and the experience of the firm's staff, etc. Of course, each nuclear firm should be free to work with other nuclear utilities and companies to create private insurance pools. Even in this case, though, rates for each firm should be set in a manner that would reward the best nuclear operators and vendors. By doing this, the government would finally be able get industry to internalize the full costs of off-site nuclear accident li­ability insurance. Given that some U.S. nuclear firms already believe that their products are safe enough for them to soon forgo Price Anderson subsidies and li­ability limits, and that the nuclear industry is insisting that its safety record has improved and will only get better, this transition over the next 15 years should go relatively smoothly. 6. Increase experimentation in the commercial dis­tribution of energy and the generation of alternative sources of energy through federal government-led reg­ulatory reform. To foster energy experimentation and competition, the federal government should promote regulatory reforms that would, among other things, (1) set standard rules for selling electricity through the grid; (2) remove conflicts of interest for existing grid or pipeline operations to block new entrants; (3) ensure that regulated utilities have similar incentives to invest in efficiencies as they do in expanding gen­eration plants and energy supplies; (4) encourage key market constraints, be they carbon limits or liability coverage, through the market pricing systems rather than through government subsidies; and (5) increase pricing visibility for power to final customers.

5. See Yves Marignac, Nuclear Power, the Great Illusion: Prom­ises, Setbacks and Threats, October 2008, p. 42, available from www.global-chance.org/spip.php?article89; and the Testimony of Thomas B. Cochran before the Senate Committee on Energy and Natu­ral Resources, Subcommittee on Energy Research and Devel­opment, June 8, 1977, available from http://docs.nrdc.org/nuclear/files/nuc_77060801a_23.pdf.

9. See Tyler Hamilton, $26B Cost Killed Nuclear Bid: Ontario Ditched Plan over High Price Tag that Would Wipe Out 20-Year Budget," The Star, July 14, 2009, available from www.thestar.com/article/665644.

11. This graph, which reflects some of the most recent nuclear cost projections, is based on a chart originally generated by Mark Cooper and spotlighted by Sharon Squassoni. See Mark Cooper, The Economics of Nuclear Reactors: Renaissance or Relapse? Ver­mont University, Institute for Energy and the Environment, June 2009, available from www.vermontlaw.edu/Documents/Cooper%20Report%20on%20Nuclear%20Economics%20FINAL%5B1%5D.pdf; and Sharon Squassoni, The U.S. Nuclear Industry: Current Status and Prospects under the Obama Administration, Nuclear Energy Futures Paper No. 7, Waterloo, Ontario, Canada: The Centre for International Governance Innovation, November 2009, available from www.carnegieendowment.org/files/Nuclear_Energy_7_0.pdf.

12. See the discussion of Constellation's calculations regard­ing its planned reactor build at Calvert Cliffs, Maryland, in Doug Koplow, Nuclear Power as Taxpayer Patronage: A Case Study of Subsidies to Calvert Cliffs," Chapter 8 of this volume.

13. U.S. Congressional Budget Office, Cost Estimate of S.14 Energy Policy Act of 2003," May 7, 2003, available from www.cbo.gov/ftpdocs/42xx/doc4206/s14.pdf. The CBO optimistically assumed that about half of the value of the projects that defaulted would be recovered in bankruptcy, for a net loss of around 25 percent of guaranteed principal. The DoE has tried to discredit even these figures, claiming that the real figures will be much lower but re­cently said it would not publicly disclose its own calculations of how much of an upfront loan fee to charge to cover for potential defaults on nuclear projects. Industry officials, meanwhile, have made it clear that if the DoE charges them much more than 1 or 2 percent of the amount borrowed to cover these risks, they will not take the loans. See Kate Sheppard," Energy Sec Unaware that Nuclear Loans Have 50 Percent Risk of Default, February 16, 2010, available from www.motherjones.com/blue-marble/2010/02/chu-not-aware-nuclear-default-rates, and Etopia News, DoE Spokesperson Says that Credit Subsidy number is ‘Proprietary and Will Remain Confidential'," available from http://etopianews.blogspot.com/2010/03/doe-spokesperson-says-that-credit.html.

18. The most recent U.S. DoE effort to skirt nuclear power's poor economic performance is to promote federal development and construction of a variety of small modular" reactors. See www.nuclear.energy.gov/pdfFiles/factSheets/2010_SMR_Factsheet.pdf. The key attraction of small reactors, between 100 and 300 MWe, is that they cost less to build than the much larger commer­cial light water reactors that currently range between 1,000 and 1,600 MWe. A full description of this type of reactor is available from the World Nuclear Association website at www.world-nu­clear.org/info/inf33.html. The other attraction is that they are more adaptable to small electrical grids than much larger reactors. For most developing states, though, even these small" reactors are too large for their grid, and the unit costs (dollars/kilowatt hour produced) for this smaller reactor are far higher than for the larg­er reactors they are supposed to best.

21. The French civilian nuclear industry and power utility system, unlike the American one, is almost entirely nationalized. As a result, France still produces incredibly opaque financial statements regarding its civilian nuclear program. What is not in dispute, however, is that because of its over-investments in base-load nuclear generators, France must export much of its pro­duction and import expensive peak load capacity, which it still lacks. For an explanation of base-load and peak load electricity, see Jay Solomon and Margret Coker, Oil-Rich Arab State Push­es Nuclear Bid with U.S. Help," The Wall Street Journal, April 2, 2009, available from http://online.wsj.com/article/SB123862439816779973.html; and Dan Murphy, Middle East Racing to Nuclear Power," November 1,2007, The Christian Science Monitor, www.csmonitor.com/2007/1101/p01s03-wome.html. See Mycle Schneider, Nuclear Power in France: Beyond the Myth," Chapter 6 of this volume.

22. Chart generated by Doug Koplow, based on data pro­vided by McKinsey and Company. See Doug Koplow, Nuclear Power as Taxpayer Patronage: A Case Study of Subsidies to Cal­vert Cliffs Unit 3," Washington, DC: NPEC, July 2009, available from www.npec-web.org/files/Koplow%20-%20CalvertCliffs3_0.pdf; and McKinsey & Company, Reducing U.S. Greenhouse Gas Emis­sions: How Much at What Cost? December 2007, available from www.mckinsey.com/clientservice/sustainability/greenhousegas.asp.

26. For an analysis relevant to the Middle East, see Peter Tynan and John Stephenson, Nuclear Power in Saudi Arabia, Egypt and Turkey: How Cost Effective?"; and Wyn Bowen and James Acton, Atoms for Peace in the Middle East: The Technical and Regulatory Requirement," Chapters 9 and 10 of this volume.

29. For an analysis showing that renewables are already more economical than nuclear or coal base load generations, though, see Amory Lovins, Mighty Mice," Nuclear Engineering Interna­tional, December 21, 2004, available from www.neimagazine.com/story.asp?storyCode=2033302.

32. For a detailed case study of such effects in the case of bio-fuel commercialization programs, see David Victor, The Politics of Fossil Fuel Subsidies, Geneva, Switzerland: The Global Subsidies Initiative, October 2009, available from www.globalsubsidies.org/files/assets/politics_ffs.pdf.

33. On this point, see the testimony of David Lochbaum be­fore a hearing of the Subcommittee on Energy and Resources of the House Committee on Government Reform, Next Generation of Nuclear Power," June 29, 2005, available from ftp.resource.org/gpo.gov/hearings/109h/23408.txt.

34. Estimates of how much Price-Anderson nuclear accident liability limits on third party damages are worth range widely between .5 and 2.5 cents per kilowatt hour. For details, see An­thony Heyes, ,"Determining the Price of Price Anderson," Regu­lation, Winter 2002–2003, pp. 26-30, available from www.cato.org/pubs/regulation/regv25n4/v25n4-8.pdf; and Doug Koplow, Nuclear Power as Taxpayer Patronage," available from www.npolicy.org/article.php?aid=179.

35. Cf., however, Peter A. Bradford, former U.S. Nuclear Reg­ulatory Commissioner, Testimony before the U.S. Senate Commit­tee on Environment and Public Works Subcommittee on Nuclear Regulation, Renewal of Price Anderson Act," January 23, 2002, available from http://epw.senate.gov/107th/Bradford_01-23-02.htm.

36. See Public Law 107-297-Nov. 26, 2002, available from www.treas.gov/officies/enforcement/ofac/legal/statutes/pl107_297.pdf; and The Terrorism Risk Insurance Extension Act of 2005, avail­able from www.cbo.gov/ftpdocs/69xx/docs6978/s467.pdf.

37. For post 9/11 overviews of the growing number of civilian nuclear-related terrorism concerns, see Carl Behrens and Mark Holt, Nuclear Power Plants: Vulnerability to Terrorist Attack," Report for Congress, RS21131, Washington, DC: U.S. Congres­sional Research Service, August 9, 2005, available from www.fas.org/sgp/crs/terrror/RS21131.pdf; National Research Council of the National Academies, San Luis Obispo Mothers for Peace v. Nu­clear Regulator Commission, No. 03-74628, 2006 WL 151889, 9th Cir. June 2, 2006; Safety and Security of Commercial Spent Fuel Storage," Public Report, April 6, 2005; and Henry Sokolski, Too Speculative? Getting Serious about Nuclear Terrorism," The New Atlantis, Fall 2006, pp. 119-124, available from www.thenewatlantis.com/publications/too-speculative.

38. See U.S. Congressional Budget Office, Federal Terror­ism Reinsurance: An Update," January 2005, section three of six, Long-term Effects," available from www.cbo.gov/showdoc.cfm?index=6049&sequence=2#pt3; and The U.S. Department of the Treasury, Report to Congress, Assessment: The Terrorism Risk In­surance Act of 2002, Washington, DC: The U.S. Department of the Treasury, Office of Economic Policy, June 30, 2005, pp. 10-12, 111-113, and 125-140. Yet another shortcoming of the current cap on nuclear accident insurance liability for third parties in the United States is the lack of commonsense differentiation between the safest and least safe and the most remotely located reactors and those located near high value urban real estate. This too discour­ages industry from engaging in best practices. See notes 26 and 34.

41. See, e.g., the testimony of David Baldwin, senior Vice President of General Atomics before a hearing of the Subcommit­tee on Energy and Resources of the House Committee on Govern­ment Reform, Next Generation of Nuclear Power," June 29, 2005, available from http://resource.org/gpo.gov/hearings/109h/23408.txt.

42. See Antony Froggatt, Third Party Insurance: The Nuclear Sector's ‘Silent' Subsidy, in Europe," Chapter 13 of this volume and Simon Carroll, European Challenges to Promoting Interna­tional Pooling and Compensation for Nuclear Reactor Accidents, Washington, DC: NPEC, January 2, 2009, available from www.npolicy.org/article.php?aid=187.

44.. Thus, when it became clear that North Korea had reneged on its promise not to attempt to enrich uranium for weapons, the Bush administration stopped construction of the two light wa­ter reactors it had promised Pyongyang because, in the words of Secretary of State Rice, North Korea could not be trusted" with them.

45. See Remarks by the President on Weapons of Mass De­struction Proliferation, Fort Leslie J. McNair, National Defense University, February 11, 2004, available from www.acronym.org.uk/dd/dd75/75news06.htm.

49. On these points, see Henry D. Sokolski, ed., Falling Behind: International Scrutiny of the Peaceful Atom, Carlisle, PA: Strategic Studies Institute, U.S. Army War College, 2008, available from www.npolicy.org/thebook.php?bid=5.

51. Because large amounts of electricity cannot currently be stored, electrical companies must estimate how much electricity their customers will use and secure the electrical generating ca­pacity to supply this demand. The difference between these es­timates and real demand produces temporary imbalances in the electrical grid that the electrical transmission system operator must correct for by either reducing the amount of electricity be­ing put on the grid or by bringing more electricity on to the grid. The latter is done by accessing electrical generators that are on the ready or spinning" to supply follow-on load capacity electricity. For a more detailed slide tutorial on these points, see Spinning Reserves, Balancing the Net," Leonardo Energy Minute Lectures, available from www.slideshare.net/sustenergy/spinning-reserve.

56. See The Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism, The World At Risk: The Report of the Commission on the Prevention of WMD Proliferation and Terrorism, New York: Vintage Books, December 2008, pp. 55-50

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